Stats

Monday, March 14, 2011

Watching Japan disintegrate before our eyes, the ongoing disaster is nearly beyond human comprehension. The scale of the loss of life and destruction of infrastructure has yet to be fully realized nor its true economic and strategic fallout.

There are definite steps that should be taken now. The demands of this once thriving economy will change drastically. So will the demands of the world economy as the ability of Japanese manufacturers to meet the technological and automotive demands of their world consumers will also be seriously diminished. There is also a likelihood of mass population displacement and migration.

While all eyes are focused on the near future down turn, the US should be prepared to move to mitigate these circumstances and reposition our economy to fill the developing needs of both Japan and the world in general.

First, while there is an immediate down turn in the demand for gasoline and oil, within the next few years, the demand will increase as Japan's energy consumption and supply likely changes. With multiple reactor failures and the probability that these nuclear reactors will be inoperable, they will likely require more oil and coal to feed their rebuilding efforts and ongoing energy needs. There is a possibility that nuclear energy will be slow to regain trust among the populace as well as the government's likely response to re-evaluating any builds based on knowledge of the engineering and structure failures as well as the ability to respond to disasters. Further, Japan's own capacity to refine has been severely damaged.

“This is a super bullish factor for the Asian middle distillates and fuel-oil market,” said Akira Kamiyama, an energy derivatives trader at Mitsui & Co. in Tokyo. “Factories which have their own generating facilities will begin to buy diesel, while utilities will start purchasing fuel oil.”

The US needs to evaluate the potential impact to US imports, supply and economics. The rising cost of gasoline and fuel oils is severely hampering the United States' economy now. Current attempts to change our energy supply are too slow and current administration plans represent unrealistic time frames without enough innovative or cost effective technologies. The economic down turn has actually put projects to expand electric supply on hold. In the meantime, the cost of the average utility bills for homes and businesses have increased by over 23%.

Food, clothing and other basic essentials have risen in direct relation to these rises. As this report indicates, there is an expected increase in diesel fuel demands. Diesel fuel costs are directly related to the costs of these items. Families and businesses cannot afford this increase. The US needs to bring its oil production and refining ability up to meet near and far future demands. The administration must review current policy on permitting drilling, existing delivery systems and capacity, and regulations governing refineries. It may even need to review tax credits for oil industry development.

The administration needs to re-assess the time lines for development of other energy within the US. These energy resources need to be explored and developed, but they cannot do so effectively, timely or cost effective in a down economy. It adds to the burden over a long term instead of providing relief. Further, it would be easier and simpler to develop these means in conjunction with developing economic regions in the US. These regions can change depending on the changes in Japans manufacturing and development where the US may pick up this demand.

These advancements cannot occur when the cost to fuel plants and deliver products eats at profit margins of companies who develop this technology or want to invest in product development, hiring employees or in people being able to simply travel to work. When gasoline prices have increased a hundred percent in a decade and, along with home energy costs, are taking a third or more of the average consumer's income, purchasing new energy efficient technology may be necessary, but it becomes equally and increasingly out of reach. Those purchases provide the capital for research and development.

It is the circle of economic life and that life is currently slipping from serious condition to critical. Therefore, it is necessary for the United States to re-evaluate it's energy plan. Increased oil and gasoline production and refinement must be part of a rational and immediate energy integration plan. This is not an "either/or" situation. It must be together, or the United States cannot move forward.